NON-RESIDENT ACCOUNTS, CUSTOMER FOREIGN CURRENCY ACCOUNTS, FOREIGN CURRENCY ACCOUNTS AND FOREIGN BANK ACCOUNTS (A) NON-RESIDENT ACCOUNTS Transactions over Non-Resident Accounts Rand accounts opened by non-residents must be designated and conducted as Non-Resident Accounts. Authorised Dealers must report any transactions, other than those specified below, which pass over these accounts to the Financial Surveillance Department. Debits Rand payments to residents for any purpose, except loans. Payments to other Non- Resident Accounts. (c) Payment for foreign exchange purchased. (d) Rand payments to the account holder whilst visiting the CMA. (e) Rand payments in respect of investment in local debt instruments in terms of the provisions of Section G(D). (f) Transactions by Authorised Dealers in terms of subsection B.2(B)(iv) (c) (d) Credits The proceeds of sales of foreign exchange made by a nonresident to an Authorised Dealer. Payments from other Non- Resident Accounts. Rand payments, which are eligible for transfer abroad in terms of the applicable sections and subsections of B.1 through B.21, as well as G. or for which approval of the Financial Surveillance Department had been obtained and after all requirements had been met. Redeposits of unused Rand withdrawn whilst visiting the CMA. All transactions, not specified above, require prior approval from the Financial Surveillance Department. (ii) Control over Non-Resident Accounts Authorised Dealers are requested to exercise extreme care over deposits to Non-Resident Accounts. Such accounts must be kept separately under the supervision of a responsible officer conversant with the principles of exchange control and the provisions of the Rulings. (31/2010)
2 Non-Resident Accounts may not be overdrawn without the permission of the Financial Surveillance Department, except as provided for in Sections I.1(B) and B.2(B)(iv). However, Authorised Dealers are permitted to use their discretion in allowing occasional overdrafts (as a result of clerical, transmission or operational errors) on the non-resident clearing accounts of foreign banks (vostro accounts) held in their books. It is, however, incumbent on the Authorised Dealer to advise the foreign bank concerned of such overdraft immediately and to request rectification. As a consequence of the volatility in global foreign exchange markets, the non-resident clearing accounts of foreign banks could become overdrawn. Authorised Dealers are requested to advise the Financial Surveillance Department of all cases where these clearing accounts overdraw regularly in amounts of R1 million and over, or, where the provision of cover is unduly delayed, i.e. beyond two business days from the date that the account went into overdraft. Cover for bank charges and other transactional expenses may continue to be provided on a periodic basis. (iii) Transfer of non-resident funds between Authorised Dealers The transfer of non-resident funds between Authorised Dealers is only permitted by means of the appropriate authenticated S.W.I.F.T. message types. For all Rand transfers, the originator must quote the following in field 72:/REC/NTNRC. Settlement will, of course, be effected via ZAPS (South African Payment System) or SAMOS (South African Multiple Option Settlements). (B) CUSTOMER FOREIGN CURRENCY ACCOUNTS (C.F.C. ACCOUNTS) Permissible C.F.C. Accountholders Authorised Dealers may open C.F.C. accounts for the following South African entities (legal persons): Single C.F.C. Accountholders (aa) (bb) (cc) (dd) (ee) Importers and exporters of goods; Authorised Dealers in foreign exchange with limited authority; locally recognised ships agents; freight forwarders; marine insurance brokers; (31/2010)
3 (ff) (gg) any South African entity, with the exception of those entities authorised in terms of the provisions of Section B.21, who provides a service from the Republic, to nonresidents and who receives payment in foreign currency in the Republic; and local entities (i.e. legal persons) involved in foreign business transactions whereby they become entitled to commissions or profit in foreign exchange as a direct result thereof, e.g. merchanting trade in accordance with Section B.12(A), insurance brokers, stockbrokers, tour wholesalers or operators, etc. It should be noted that such C.F.C. accounts may not be overdrawn without prior approval from the Financial Surveillance Department. Special C.F.C. Accountholders (aa) (bb) The insurance industry to cater for foreign currency working balances in terms of Section B.10(D)(iv); local entities involved in the importation and exportation of rough diamonds, crude oil, wrought gold and/or steel. Separate C.F.C. accounts, clearly designated as Special C.F.C. accounts may, on application to an Authorised Dealer, be opened for these local entities (i.e. legal persons), to facilitate the local settlement in foreign exchange between such accountholders in respect of transactions which will result or have resulted in the direct importation and/or exportation, by one of the entities involved, of rough diamonds, crude oil, wrought gold and/or steel. The following provisions must, at all times, be strictly adhered to: (1) No more than two local entities (i.e. one buyer and one seller) may be party to any transaction to be so settled and both parties must obtain permission from their respective Authorised Dealers to conduct Special C.F.C. accounts for such transactions. Authorised Dealers must liaise with each other in this regard; (2) one of the parties to transactions to be so settled must be a registered importer and/or exporter of the commodity in question. The Authorised Dealer of the importer and/or exporter should be presented with suitable documentary evidence to this effect; (31/2010)
4 (3) the commodities to be so acquired must be destined for exportation or importation by one of the parties concerned and documentary evidence to this effect should be presented to the Authorised Dealer in whose books such a party conducts or wishes to conduct a Special C.F.C. account; (4) only the aforementioned transactions may be settled over such Special C.F.C. accounts; (5) only the party that will have to convert Rand to foreign exchange in order to settle such transactions, may be permitted to hedge its exposure in respect of the particular transactions. It follows that the party, which will export or import the commodities, may not be permitted to enter into hedging transactions in respect of their accruals or commitments resulting from such transactions; and (6) Authorised Dealers should ensure that all other provisions of the Rulings regarding imports, exports and hedging are fully complied with. (cc) Authorised Dealers may allow local entities who are oil and gas right holders and whose sole trade relates to exploration and production (i.e. extraction only), to open and conduct C.F.C. accounts without any restriction on the nature of transactions passing over the account, provided that all requirements relating to reporting, in terms of the Reporting System, are adhered to. (ii) Control over C.F.C. Accounts The opening of C.F.C. accounts for any other purpose requires prior approval from the Financial Surveillance Department. The above-mentioned accounts are subject to the following conditions: These accounts must form part of the bank s nostro account administration and accordingly the customer cannot operate on it other than through and with the full cognisance and approval of the Authorised Dealer concerned. Customers are permitted to retain funds in their C.F.C. accounts without the obligation to convert the funds into Rand. The current repatriation requirement remains extant; only foreign exchange transactions concluded in the name of the accountholder and which qualifies as a permissible debit and/or credit, may be passed over these accounts; (19/2012)
5 (c) (d) (e) (f) (g) all transactions must comply fully with the provisions of the Rulings or the provisions of specific authorities from the Financial Surveillance Department, including the viewing and endorsement of documentary evidence where required. The foreign amount involved must, of course, be annotated on the relevant documentation; hedging transactions may be entered into for specific import payments and the maturity proceeds used to replenish an overdrawn C.F.C. account. Foreign exchange may also be purchased in the spot market to replenish an overdrawn C.F.C. account; for compliance purposes, both the account holder and the Authorised Dealer must maintain an audit trail of all set-off s; foreign currency purchased in the spot market for permissible transactions in respect of a firm and ascertainable underlying commitment or the maturity proceeds of hedging contracts may only be credited to a C.F.C account if the funds are to be transferred abroad within a period of 30 days. Authorised Dealers must ensure that this dispensation is not abused; when permitting the transfer of funds between C.F.C. accounts at different Authorised Dealers, such transfers may only be by means of the appropriate S.W.I.F.T. customer transfer message type. The following provisions should also be adhered to: (aa) (bb) (cc) If proceeds are transferred between C.F.C. accounts, Field 72 of the appropriate S.W.I.F.T. customer transfer message type should clearly indicate TRF SPOT and/or TRF HEDG In the event of funds being transferred in bulk, this information should be broken down into the specific amounts, making up the total transferred; the Authorised Dealer receiving funds for credit to a C.F.C. account from another Authorised Dealer, may not accept such funds if Field 72 does not indicate, inter alia, the date on which the funds were originally credited to the C.F.C. account; transfer of foreign exchange, which was not acquired by means of a spot transaction or from the maturity of hedging contracts, should be reflected in Field 72 as TRF FROM ABROAD; (dd) transfer between local entities in settlement of transactions in rough diamonds, crude oil, wrought gold and steel, should be reflected in Field 72 as TRF 4 COMMODITIES; and (5/2015)
6 (ee) the authority number should be reflected in Field 72 in the event of funds being transferred between C.F.C. accounts in terms of specific authorities granted by the Financial Surveillance Department. (h) (j) if a C.F.C. account has been debited in respect of bridging finance, no forward cover may be availed of, as the account may only be replenished by means of proceeds received from abroad; where a group of companies operate C.F.C. accounts, the South African parent company may consolidate the group s earnings and any local subsidiary may utilise the funds, provided that the group operate through a centralised treasury located in South Africa; and interest earned on C.F.C. accounts may be retained in such accounts and be used for set-off purposes. (iii) Permissible set-offs/debits over C.F.C. accounts The following payments may be set-off against single C.F.C. account balances: (c) (d) (e) (f) (g) (h) (j) (k) Imports and software electronically downloaded, including all costs related thereto; the payment of expenses such as commission, freight, insurance and demurrage, which are expressed in a foreign currency; advertising, exhibition or trade fair expenses; charges for repairs and adjustments to goods exported temporarily; charges in connection with legal disputes; examination fees where the accountholder is responsible for the payment thereof; fees in respect of services rendered; fees in respect of the registration of drugs; royalties and fees arising from the use of patent, designs and trademarks; subscriptions; and technical service payments. (26/2014)
7 The set-offs/debits referred to above may, of course, only be passed provided the Authorised Dealer concerned has satisfied itself that the transactions are permissible in terms of the various sections of the Rulings or in respect of which a specific authority has been granted by the Financial Surveillance Department. (iv) Exemptions Freight payments, which are expressed in foreign currency and are directly related to a specific import or export transaction, may be settled between local entities (i.e. legal persons) in foreign currency. Similarly, importers who do not conduct a C.F.C. account or who have no inflow of foreign currency, may purchase foreign currency in the spot market to pay freight charges to another resident provided that such resident has an obligation to pay freight charges in foreign currency. Foreign exchange held by a locally recognised ships agent (including cash to master transactions), freight forwarder, marine insurance broker or tour wholesaler or operator for the ultimate benefit or account of a non-resident entity, e.g. a ship s owner, freight forwarder, insurance broker or insurance entity abroad, need not be offered for sale to an Authorised Dealer. These funds may be retained in a C.F.C. account until distribution on behalf of or remittance to the non-resident beneficiary abroad. Authorised Dealers must ensure that this concession is not abused. If the accountholder is required to pay any interest on an overdrawn account by converting Rand into foreign currency, this may be permitted in the spot market. (C) FOREIGN CURRENCY ACCOUNTS (F.C. ACCOUNTS) F.C. Accounts may be opened for private individuals (natural persons) resident in the Republic for transactions permissible in terms of the Rulings and for non-residents. (D) FOREIGN BANK ACCOUNTS Conditions applicable to the opening of Foreign Bank Accounts by companies Authorised Dealers may approve requests by South African companies to open and operate Foreign Bank Accounts, subject to the following conditions: Only South African companies that have legal/bona fide sources of income abroad are permitted to open Foreign Bank Accounts; all foreign credits to such bank accounts are subject to the provisions of Regulation 6, except in respect of foreign earned (10/2012)
8 dividends which are exempted from the aforementioned Regulation; (c) (d) (e) funds that accrue in Foreign Bank Accounts must be in respect of transactions permissible in terms of the Rulings or a specific authority granted by the Financial Surveillance Department; applicants must give written undertakings to Authorised Dealers that no debits other than transfers to South Africa, debits permissible in terms of a specific authority from the Financial Surveillance Department or bank charges, will be passed over the Foreign Bank Accounts; and Authorised Dealers must furnish the Financial Surveillance Department with confirmation from the account holders that the Foreign Bank Accounts have been conducted within the ambit of the aforementioned conditions, on an annual basis. The Financial Surveillance Department reserves the right to instruct the applicant company to close any Foreign Bank Account and for any funds accumulated therein to be repatriated to South Africa, in the event of the above-mentioned conditions not being complied with. (ii) Information to be furnished to the Financial Surveillance Department At the time of approving the opening of the Foreign Bank Account, Authorised Dealers must report the following: a) The name and registration number of the applicant company; b) domicile of where the Foreign Bank Account has been opened; c) the account holder and account number; and d) the purpose of opening the Foreign Bank Account. ---ooo--- (10/2012)